Rally in PSB stocks looks justified

Banks hope new rules will resolve bad loans faster

On a day when most indices were in the red, the Nifty public sector bank (PSB) index rose 1.3 per cent on Monday. The reason for the optimism on PSB stocks is that the new resolution mechanism, likely to be announced in the next few weeks, is expected to give PSBs leeway to recover bad loans and improve pace of bad-loan resolution. Well, this isn't the first time that PSB stocks are getting jubilant about such likely initiatives, and the past two years have seen bankers work particularly hard to resolve bad loans.

First in June 2015, the provisions for corporate